Gold and silver trading outlook: futures gain as Ukraine election is in focus

Precious metals added to weekly gains logged on Friday during early trading in Europe today. Risks over tensions in Ukraine are in the focus ahead of the presidential election on May 25th. Last week gold and silver futures closed for gains amid mixed signals from the US economy.

Gold futures for delivery in June traded for $1 300.9 per troy ounce at 8:13 GMT on the COMEX in New York today, adding 0.58%. Daily high and low stood at $1 301.7 and $1 289.5 per troy ounce, respectively. Last week the contract gained 0.46% as risks over Ukraine supported, amid mixed signals by the US economy.

Meanwhile, silver contracts for July stood at $19.580 per troy ounce, adding 1.30%. Daily high and low were at $19.610 and $19.310 per troy ounce, respectively. Last week the contract rose by 1.13%.

Ukraine

Kiev is holding talks with political and civic leaders in an attempt to devise a way out of the crisis, which has dominated the geopolitical scene for the past months. However, separatist militia were not represented. Acting Ukrainian President Olexandr Turchynov said Kiev was prepared to listen to rebels, but they must lay down their arms first.

The talks are part of the Organisation for Security and Co-operation in Europe’s “roadmap” out of the crisis and an attempt to defuse tensions before the presidential elections on May 25th. The US threatened more sanctions if “Russia or its proxies” try to ruin the vote.

Elsewhere, the UN Assistant Secretary General for Human Rights Ivan Simonovic said for the BBC that Ukraine was “approaching the point of no return.” He added that there had been many cases of torture, abduction and murder in the troubled eastern and southern regions of the country. He added that he hoped the planned presidential election could take place, but that it would be “extremely difficult”.

“In the run up to the elections next week the tensions will continue,” said for Bloomberg Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Even after the presidential elections it’s unlikely to calm down. So this factor of instability is likely to stay.”

Previously, Donetsk and Luhansk regions declared independence, following the referendum last Sunday. Separatist leaders said all Ukrainian troops in the provinces will be regarded as “occupying” forces.

The “People’s Republic of Donetsk” appointed a prime minister on Saturday, who said the newly independent state would apply to join Russia, the BBC reported. Moscow has earlier said that it expects the “will of the people be implemented,” in regard of the self-rule referendums last week. However, the Kremlin has not commented of the rebels’ request for the breakaway provinces to be incorporated into the Russian Federation.

Economic data

The overall improvement in the US economy has boosted equities demand and pressured haven appetite recently. Housing data, jobless claims and consumer inflation all marked better than expected last week, some recording historic highs, and although industrial production and retail sales posted sluggish results, stocks remained near record-high levels on Wall Street as trading closed for the week.

Assets at the SPDR Gold Trust – the largest gold-backed exchange-traded fund, returned to the two-week losing streak on Friday, following a slight recovery on Thursday. Holdings were at 781.98 tons as trade for the week closed, dropping 0.27 tons from the previous day. The fund has lost more than 12 tons over the last two weeks, reflecting the lowering investor haven demand.

Last week, Goldman Sachs confirmed its previous assessment that gold will drop to $1 050 per troy ounce in a years time, pressured by the global economic recovery and a stronger dollar.

Elsewhere, the Eurozone is experiencing troubles, as revealed by last weeks GDP and CPI reports. Although Germany, the EU top economy, scored high, other countries like France, Italy and the Netherlands posted sluggish figures and dragged the Blocs readings. The results prompted a retreat for the euro, as stimulus, indicated by ECB President Mario Draghi earlier in the month seems imminent.

The euro fell to a ten-week low at 1.3649 EUR/USD on Thursday and logged a weekly drop of 0.49% against the greenback, closing for 1.3694 EUR/USD. With every sizable decline in the euro the US dollar rises, which increases the cost of dollar-denominated goods for all foreign currencies.

“With generally bright U.S. economic data and Eurozones impending stimulus propping up dollar prospects, we are more inclined to a bearish break in gold prices,” said for Reuters Joyce Liu , analyst at Phillip Futures. “That said, the Ukraine crisis continues to provide underlying support and any hint of escalation may spur gold prices above $1,300 again.”

Technical view

According to Binary Tribune’s daily analysis, in case Gold June futures on the COMEX manage to breach the first resistance level at $1 298.6, the contract will probably continue up to test $1 303.7. In case the second key resistance is broken, the precious metal will likely attempt to advance to $1 309.2.

If the contract manages to breach the first key support at $1 288.0, it will probably continue to slide and test $1 282.5. With this second key support broken, the movement to the downside may extend to $1 277.4.

Meanwhile, silver futures for July will see their first resistance level at $19.488. If it is breached, the contract will meet next resistance at $19.646, and then the third level at $19.763.

Silver will find its first support point at $19.213. Should it be breached, the second level of support is estimated at $19.096 and the third at $18.938.